Not fair to make state employees suffer for policymakers' mistakes by denying them much-needed raise, economist says

Workers repair an electric grid in Hanoi. Experts say the government should cut unnecessary public spending and increase salaries for state employees. Photo: Reuters

The government has proposed that the National Assembly, at its ongoing semiannual session, refrains from increasing the monthly minimum wage for state employees from the current VND1.05 million (US$50) to VND1.3 million beginning in May as scheduled, citing a budget shortage. Amidst the economic slowdown, state budget revenues have fallen, so the government is not well placed to give a raise that would cost some VND60 trillion, it has said.

However, economist Le Dang Doanh is not impressed. The government can cut unnecessary public spending and ineffective investments to fund the wage hike, which could spur consumption and give the economy a boost, he argues in an interview with Vietweek.

Vietweek:So you do not agree with the government's proposal?

Le Dang Doanh: I do not. In fact, I am very surprised. Those who know local people and have not yet lost their connection to real life will understand how difficult the laborer's life is. Everything, whether it is healthcare, education or food, is more expensive, but wages have not increased.

We could save more and increase funds that can be used for the salary increase. Just look at the ineffective investment projects we have. Look at officials using state-owned cars to attend wedding parties, pagodas, take their children to schools, or on so-called overseas study trips"¦ I think the government could cut the unnecessary expenditures; it would not hurt economic development. So I would propose strongly that the National Assembly consider the move very carefully.

The government should balance the state budget to ensure the raise, especially for low-income earners like teachers.

There is an opinion that inflation now is not too high, so the salary increase is not an imperative. How would you respond?

Economist Le Dang Doanh

That is not correct. The price indices of essential items and services, including education, healthcare and food have sharply risen, as I said earlier.

If the raise is not given, what would be the impacts on the economy?

If the life of workers becomes too difficult, negative things can happen. For example, teachers in public schools may collect fees that are not allowed. It would be very difficult to control such things.

With a low salary, people cannot afford essential goods and services. Local purchasing power will remain stagnant, as a result.

The salary hike would help local people feel more secure, contribute to improving consumption, especially for some essential products. The raise in wages would also help increase the productivity as workers will have greater motivation to be more active.

We should learn from the experience of some European countries, as their harsh measures have faced fierce opposition from normal citizens. We should not force innocent people to suffer the aftermath of mistakes made by other people (in developing the economy and balancing the state budget). Europe is a big example for this.

What should we do to reform the salary system?

We should map out a specific plan for this and wait for the economic recovery. I think now is not a suitable time to think of far reaching reforms.

What measures would you suggest to increase budget revenues and make the wage raise possible?

As I said earlier, we could do it by cutting spending, while increasing the effectiveness of investment projects. Smaller investments can still ensure stable economic growth. Now, projects get big investments, but they have not shown themselves to be effective. It is hard to see state-investment projects that have received positive reports from auditors.

Should we consider reducing the workforce at state agencies, to facilitate the salary raise?

Obviously, we should. We should consider cutting the number of workers to reduce spending. In addition, it is necessary to increase their productivity, especially in the current context.

I have to repeat. We have to cut spending to have more funds for the salary increase. If we raise the salary, but the budget deficit expands, then an inflation hike may happen again.

MEAGER INCOME

Economist Nguyen Van Nam says many state employees, with meager incomes, have to raise a family of three or four people. If their salary does not increase, their lives will be hurt.

Meanwhile, Vietnam has one of the highest inflation rates in the world. It is expected to see an inflation hike of 8 percent this year, while a rate of 3 percent is considered high in other countries, he said. "Inflation of 5 percent is considered a crisis in some countries."

Thus, there is a risk of economic instability if the salary is not increased, he said.

"The issue is if the government respects the rights of workers or not. It is not because we lack money to do it."

Nam echoed Doanh on the need to cut public spending and improve investment effectiveness to generate bigger funds for raising the salaries of state employees. Right now, Vietnam is experiencing a great deal of wastefulness in public spending and investment. It already has too many international airports, seaports and cement factories, but still continues to invest in such projects, he said.

In fact, the government has not cut public spending and investment by much since the inflation hike some years ago, he said. "There are many projects in which careful consideration has not been given to whether it is necessary to implement them now or not. In fact, the National Assembly can point out many projects that should not be invested in now."

Money saved from cutting investments in such projects will be enough to increase the salary for workers, he said.